10 reasons which make distributors of imported tyres struggle in the Indian market – The Shanty Chaddha Diaries.
Hi Shanty, It was Pammy on the other side.
Pammy is my friend from the tyre industry and is a distributor of an imported non-Chinese tyre brand in India. He wanted to meet up, and we agreed to catch up at Starbucks in Connaught Place.
The first look at him and I knew he was hassled. I had always known him to be a jolly fellow ever cracking his “punju” jokes. As we sat down enjoying our Cappuccino we started talking. He sounded serious and soon came to the point. He had wanted to meet me as he wanted to take my opinion on whether he should stay in the tyre distribution or not. I had known him to be a battle hardened professional and he throwing in towel was definitely not a good sign. We started talking about the general business conditions in the Indian tyre industry and the way forward for him. I patiently sat listening to the issues which he faced day in and out trying to grow Indian market for the brand which he distributed.
As he walked out I went back and ran through all the issues he had raised. I myself had been concerned about the unstructured way the foreign tyre brands are trying to enter into the Indian market. It does surprise me that world’s best tyre brands struggle when they enter into the Indian market. In my personal opinion it’s not the market which fails them but their hands off approach which is largely to blame. I have always felt that they can do much better by just tweaking their distribution and marketing model. As I reached home I quickly sat down to pen down my take away from the meeting with focus being the challenges which distributors of imported tyres face in India and draw them into 10 pointers for a quicker understanding. Here are these 10 pointers:
- All imported tyres are perceived as Chinese Tyres: Pammy has been importing non-chinese tyres and when he started his tyre distribution business he was clear that he will like to steer clear of the Chinese brands to differentiate himself from the crowd. It’s not that all Chinese brands are bad, it’s just that a certain perception has been created among the Indian consumers about their quality. However when he hit the market with his brand, it ended up being bench marked against the Chinese prices. Pammy did try to wriggle out some premium over the Chinese brands but it has been a constant pain as the dealers invariably clubbed his brand with Chinese to bring him down on the prices. Further his brand though big back home simply does not ring a bell with consumer in India.
- No promotion efforts from the brand: Pammy mentioned that things could have been different had his brand made an effort to create some awareness among the consumers. He said that there have been lot of discussions around brand building but none gets translated as usually it requires some spend and no one wants to commit that kind of money. This is a common problem with the brands wanting to sell in India through their importers and distributors. As the result dealers end up selling even globally recognized brands in competition to Chinese. Pammy did agree that he does get some % age discount on his invoice which he is expected to spend on marketing but thanks to competitive market he is forced to include it as a part of his costing and ends up passing it on as a discount to his dealers. On a longer term it’s the brand which suffers.
- Marketing is left to the distributor: Pammy also mentioned that he is a distributor but the brand expects him to handle marketing too and he has absolutely no clue about it. Further his day is spent in managing day to day operations and he has little mind space to think about marketing. Moreover marketing requires certain skill sets and domain understanding which he does not have. I agreed with him when he said that brands should handle marketing themselves rather than passing it on to the distributors.
- After sales service: Pammy runs his own tyre retail store and now distribution too. Tyre distribution has many aspects to it including after sales service. He has got his warranty cards printed but has absolute no infrastructure to handle complaints / queries. He is almost a single man army and invariably the dealer enquiry or claim does not get handled very efficiently. This puts off the dealer and the consumer too. He agreed with my contention that brands would do a great service to themselves and their distributors if they can have a mechanism to separate after sales service from distribution as it requires altogether different mindset and approach.
- Too much competition: Another phenomenon which we ended up discussing was the competition which has increased in leaps and bounds since last couple of years. Chinese are getting desperate and are selling tyres at crazy prices. Further there are lot of tyre companies who have been able to get BIS approvals and more are taking it every passing day. To complicate matter for him Indian Tyre companies have also increased their capacities especially of PCR and not all are 100 % utilized. They are also giving a tough competition to the imported tyres.
- Constant pressure to buy: Further the brands put constant pressure on distributors to buy more. Pammy agreed that he got carried away in past and ordered more than required quantities to get better prices and was now finding it difficult to offload the same in the tough competitive requirement. He during his conversation mentioned that in desperation to push sales he has sometime offloaded tyres with meagre gross margin of Rs. 100/- only.
- Slow moving stocks a bane: One of the problem he mentioned was slow moving stocks which he has ended up accumulating. Of all the sizes for which the tyre brand has taken BIS, there are some which are slow moving. The brand wants to sell all sizes in an equitable manner (especially the bigger inches) but some of the sizes simply do not move. May be the channel he has developed does not have capacity to handle bigger sized tyres. He has some sizes sitting in stocks for more than 12 months and now there are firm chances that those will not move at all. This was one thing which was making him more nervous.
- Cannot afford too many feet on the ground: I suggested to Pammy that he should have more sales guys on ground as this will enable him to enroll more dealers and do more sales. He just trying to coordinate and do sales on phone will not push his sales. He said that on paper it’s a good idea but not very practical. Managing teams is not his forte. He has been a retailer all his life and distribution was a later diversification. He could handle workers but not the sales executives which have altogether different career aspirations. Further he said that a good sales person, after the interview, never joins when he realizes that he has to operate from a retail store. He wants a proper working office environment which distributors are unable to provide.
- No dealer loyalty: Pammy also rued the fact that he makes huge efforts in enrolling a dealer but the dealer after a while shifts his loyalty to another brand. That is something which we had pointed out in our earlier article in Tyre Times too. As average dealer in India does not have capacity to showcase and sell more than 5 brands. Tyre dealer community is a fickle lot especially with imported brands and no sooner one offers a slightly better terms they shift there. Absence of strong brand presence among consumers allows dealers to play merry go around with the tyre brands.
- Dealer expects exclusivity: Pammy mentioned that his ability to expand the dealer channel also gets limited as big tyre retailers in any given city ask for an exclusive sales rights for the city. Invariably he agrees but most of the times even these exclusivities do not get translated into the promised business as many of the dealers do not live up to their quantity commitments. After failing with one, moving to another dealer becomes difficult as the new prospect feels that if the first one did not succeed with the brand it will be difficult for him too. He said that there are many such areas where he is struggling due to this fact.
This is not the story of only Pammy but probably is reflection of challenges which other distributors face too. It’s important that International Tyre brands realize that if they have to prize open the Indian market they should approach it with greater commitment. Leaving everything to a distributor to manage is not a good idea. It’s important that tyre brands understand the ground realities and shape their strategy accordingly. If Kenda can do it, so can they. How Kenda managed to succeed in India? Now that’s a story be told at another time.
Shanty Chaddha Tyrewala.